Alamo City in hunt for foreign investments

Updated 8:43 am, Sunday, November 25, 2012

Maria de Lourdes Sobrino, founder and CEO of Lulu’s Dessert Corp., takes a call as she walks across the loading zone of the site she purchased in San Antonio.

Maria de Lourdes Sobrino, founder and CEO of Lulu’s Dessert Corp., takes a call as she walks across the loading zone of the site she purchased in San Antonio.

Photo: Bob Owen, San Antonio Express-News

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Sobrino started her company, which makes gelatin dessert products, in California about 30 years ago.

Sobrino started her company, which makes gelatin dessert products, in California about 30 years ago.

Photo: Bob Owen, San Antonio Express-News

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City Councilwoman Elisa Chan speaks for representatives of the Texas South-International Alliance during a signing this month of a memorandum to recruit foreign investment.

City Councilwoman Elisa Chan speaks for representatives of the Texas South-International Alliance during a signing this month of a memorandum to recruit foreign investment.

Photo: Tom Reel, San Antonio Express-News

Alamo City in hunt for foreign investments

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San Antonio's decades-long quest for foreign investments spans the globe.

Just last week, Mayor Julián Castro traveled to London on a trade mission. Another is planned to India in January, and a South Texas delegation is arranging an early 2013 visit to China.

The results of past efforts are plainly seen in San Antonio today. Foremost is the Toyota Motor Corp. assembly plant.

Two decades after the city began courting Japanese investments, the plant opened in 2006. At $1.4 billion, the facility is San Antonio's largest foreign investment to date. It now employs 2,800. Another 2,800 are employed at the plant's onsite suppliers, many of which are Japanese companies with local partners.

The city welcomed the news earlier this year of two huge South Korean investments in response to a CPS Energy solar energy proposal that will create two new headquarters in San Antonio and bring a new industry to the city.

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Other deals are materializing — such as Japan's Maruchan Inc., which will produce instant noodles — that are joining earlier investments, ranging from a Spanish-operated call center, Atento, to Mrs. Baird's Bakeries, a former U.S. company acquired by Mexico's Grupo Bimbo.

Yet San Antonio's success in landing foreign investment lags behind other Texas cities. It lacks base resources such as a seaport, overseas airline routes and foreign consulates other than Mexico's.

And although San Antonio is only about 150 miles from Mexico, Mexican investments tend to be limited to commercial real estate and restaurants that are overshadowed by the larger projects placed by Asian firms.

The city also has had to defend its efforts this year from a surprise media attack.

Business and government leaders across the city did a double-take when they saw an October CNN report that criticized CPS Energy for selecting South Korean companies over U.S. bidders for the utility's solar energy project.

The broadcast seemed to be a slap at foreign investments in general, not just OCI Solar and Nexolon America LLC, which had agreed earlier in the year to invest more than $100 million and create 800 permanent jobs here.

In a city that seeks foreign investment on more than a dozen public- and private-sector fronts, no one had blinked when CPS Energy announced the South Korean deals.

If anything, the accords were viewed as validation of decades of pushing the city's name onto the international scene, a common practice among large cities everywhere.

“I was disappointed” about the CNN report, said Rene Dominguez, the city's economic development director.

Dominguez said the report missed the point of the deal. The CNN story didn't make clear that OCI Solar and Nexolon would make San Antonio their headquarters' city and that the jobs will be in San Antonio permanently.

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Where the business is going in Texas

Foreign and foreign-backed companies in Texas, by city

• Houston: 919

• Austin: 252

• Dallas: 201

• San Antonio: 136

• Fort Worth: 68

• El Paso: 61

Source: Texas governor’s office

Businesses that are operating in San Antonio

A sample of foreign and foreign-backed S.A. companies:

• Toyota Motor Corp., Japan

• OCI Solar, South Korea

• Nexolon America LLC, South Korea

• Innovative Trauma Care, Canada

• Atento Call Center, Spain

• American Medical Response, Canada

• BAE Systems Inc., United Kingdom

• Genzyme Oncology, France

• HERO Logistics LLC, Japan

• Maruchan Inc., Japan

• Mrs. Baird’s Bakeries, Mexico

• Takata Seat Belts Inc., Japan

• UBS International Inc., Switzerland

• Vutex Inc., Japan

Source: Texas governor’s office

“Foreign investments are one of our leading strategies. It would be a disservice to the community not to look for foreign direct investments,” Dominguez said.

Yet San Antonio has not been a magnet for foreign investment that other large Texas cities have been, despite extensive, wide-ranging programs aimed at attracting global attention.

S.A. vs. Texas

No one keeps precise count of Texas foreign investments. The best list is maintained by the governor's office, which tracks foreign investments, including foreign companies making direct investments and foreign partnerships with U.S.-based companies that have a Texas presence. A disclaimer for the online list calls it a “representative sample.”

Houston easily tops the list with 919 entries. Austin is second with 252, followed by Dallas with 201. San Antonio is fourth with 136.

“There are a lot of historical factors,” noted Kyle Burns, Free Trade Alliance San Antonio president and CEO. “Houston is a port city with lots of international traffic. It's a place for people to start. Dallas-Fort Worth has its large airport. It's nothing you can change. It's what makes sense to the businesses at the end of the day that decides.”

“Houston and Dallas have a critical mass that San Antonio lacks,” said David Marquez, Bexar County's economic development executive director.

Those cities have numerous foreign consulate offices; airports with international, transoceanic routes; and industries that tend to be global, such as Houston's petrochemical industry, Marquez said.

Recruiting

Numerous public and private groups here have roles that seek foreign investment. The rapidly growing Asociación de Empresarios Mexicanos, founded and based in San Antonio, is a group of Mexican business owners who specialize in recruiting other Mexican business owners to expand in the United States.

The center currently has more than 30 clients planning to bring investments totaling more than $5 million — one as high as $800,000. More center clients are from Mexico, but some current clients are from France, Spain and the Dominican Republic.

International Business Development Center staffers often travel to Mexico to speak at “Doing Business in Texas” seminars and to direct interested business owners to San Antonio and the alliance's services.

Port San Antonio representatives often travel on trade missions and to trade shows to market their real estate, building and logistics services to foreign companies.

Also, Brooks City-Base recently won federal approval for an EB-5 regional center that covers Bexar County. Under the federal EB-5 program, foreign investors can obtain legal residency in the United States by investing at least $1 million, or $500,000 in high-unemployment areas, in developments that create at least 10 jobs.

Brooks City-Base hopes to attract foreign investments, financing that would be cheaper than bank loans, to help pay for streets and building renovations at the former Air Force base. Because its EB-5 program covers the whole county, developers planning shopping centers, apartments, hotels, hospitals and other job-creating projects anywhere in Bexar can participate.

The Economic Development Foundation recruits business investments worldwide, marketing San Antonio's proximity to Latin America.

“Europeans have stopped at the East Coast. Asians have stopped at the West Coast. Our ties to the Southwest market, to Mexico and to the South American markets are key to us,” EDF President Hernandez said.

Various chambers of commerce have international roles, too. The San Antonio Hispanic Chamber of Commerce, for example, has an international trade department and organizes numerous trade missions, mainly to Mexico and Spain.

“The CNN report completely ignored these multinational companies that create jobs. It's not either-or,” Hispanic Chamber President and CEO Ramiro Cavazos said about the choice between domestic and international investments.

“OCI and Nexolon are not only creating a whole new industry in San Antonio (solar energy),” Cavazos said. “They will build a supply chain similar to what Toyota did. To say this investment is not wise is inaccurate. This will grow San Antonio's capability.”

Mexico

Eduardo Bravo, chairman of the Asociación de Empresarios Mexicanos, said Mexican investments tend to be in houses, commercial real estate and small businesses.

“But we have a competitive city, and we need large investments. Large companies like FEMSA (a Mexico-based bottling company) need to turn around and look at San Antonio,” Bravo said. “Mexicans know that there is aerospace, auto, energy, information technology and biotech in San Antonio. We have opportunities for companies in Mexico.”

That's why AEM plans trade missions in 2013. Bravo said San Antonio leaders in the industries he listed will be invited to travel with the trade missions.

“We want to shorten the learning curve for Mexicans to do business in the United States and to be successful,” Bravo said.

One of the new Mexican investors coming to San Antonio is Maria de Lourdes Sobrino of Mexico City, who's founder and CEO of Lulu's Dessert Corp. Sobrino started her company, which makes gelatin dessert products, in California about 30 years ago, but she is closing it and moving it to San Antonio with an investment of about $3 million.

The production plant, which is being set up in a remodeled Hot Wells Boulevard building on the South Side, will employ 25 to 30 workers beginning in January.

Lulu's main customers are H-E-B and Wal-Mart Stores Inc. Being close to H-E-B headquarters in San Antonio is one reason for the move.

“It's also in the Midwest, which is important for our transportation,” Sobrino said.

Sobrino conducted research in several cities before selecting San Antonio.

“I looked at the markets, customers, the cost of finding property and industrial real estate and to find labor for us,” she said.

“The people here have made me feel welcome, the Hispanic population. It's close to Mexico, and we are exporting our products also to Mexico,” she said.

Canadian investor

A new Canadian investor is Dr. Dennis Filips, CEO of Innovative Trauma Care, based in Edmonton. The company recently made San Antonio the headquarters of its U.S. subsidiary as it launches its initial product, a clamp meant to stop bleeding from wounds.

“San Antonio is the perfect place to come,” Filips said. “The city has a commitment to the life sciences and strong leadership in trauma care. Many medical device companies already are here.

“San Antonio has the human capital and investors experienced in medical devices,” Filips added. “We have been able to accelerate our business years faster, based on our experience here.”

Innovative Trauma Care has completed an initial round of investments of almost $3.5 million and plans a second round of $5 million to $6 million next year. About two-thirds of the investments have come from Canada, the rest from the San Antonio area, all supporting operations in both countries, he said.

City as ambassador

Mayor Julián Castro has paid international visits laying the groundwork seeking foreign investments. In 2010, Castro traveled to Shanghai, China, for that city's world's fair. In 2011, he went to Mexico City in a trade mission that helped bring new airline service to San Antonio International Airport from a Mexico City-based airline, Interjet.

City Councilwoman Elisa Chan, who helped organize the 2010 China trip, led the creation of a follow-up effort called the China Advisory Committee that recently was expanded and renamed the Global Advisory Committee. The group is dedicated to drawing up a strategy to attract foreign investments.

The EDF and the city have started writing a new economic development plan, a process that will take eight months. The new plan will have a foreign investment section. The Washington-based Brookings Institution has selected San Antonio for its metropolitan trade program and will collaborate with the city in listing its assets to market the city for international investment.

To diversify to a regional approach, five South Texas cities — San Antonio, San Marcos, Corpus Christi, Brownsville and Edinburg — have banded to form the Texas South-International Alliance, with Chan's help. A China trade mission in the first quarter of 2013 is being planned.

“With the economic situation domestically, the piece of the pie has shrunk,” said Chan, a native of Taiwan, referring to the national recession and slow recovery. “We can either seek more market share or add to the size of the pie,” Chan observed. “Foreign investment is the best way to increase the size of the pie and increase our markets to have the type of growth we used to enjoy.”